Risk and Return (Part 1)

How can income-oriented investors survive in today’s climate?

With the Fed keeping rates near zero seemingly forever, it’s hard. Many investment portfolios grew during the ‘80s and ‘90s and stagnated during the ‘00s, but now investors need their portfolios to produce income.

In the past we’ve encouraged an all-of-the-above approach that uses corporate bonds, dividend-paying stocks, long-dated municipal bonds, and even limited partnerships to replace the income that formerly came from a simple ladder of Treasury Notes. We live in interesting times; what worked before may not work anymore.

Corporate bonds are particularly interesting. Unlike equities, they represent a contractual claim on cash, and so they are likely to be less volatile than stocks. But by taking some credit risk, investors can generate more income. That’s important, because “safe” Treasury Notes now yield less than inflation—so they are guaranteed to lose money in real terms.

Every investment carries risk. If we understand the risks we’re taking, and choose wisely, our investments should be able to meet our needs.

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Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. -
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The Global Market Update is curated by Douglas Tengdin, CFA an employee of Charter Trust Company. The opinions expressed herein are those of the author and do not necessarily represent the views of Charter Trust Company.
Investments may involve investment risk, including the possible loss of value.